Toyota Motor Corp is in talks to supply Daimler AG, the maker of Mercedes-Benz cars, with parts and technology for hybrid vehicles, Japan's Nikkan Jidosha newspaper reported on Thursday.
Daimler approached Toyota and is looking to use the Japanese automaker's hybrid system in its A Class compact model in 2013 or later, the industry paper said.
A supply deal between Toyota, the world's biggest automaker, and the German premium car maker would come as a surprise since Daimler has been working with rival premium car maker BMW AG on hybrid development.
Daimler also recently formed a wide-ranging partnership with Renault SA and Nissan Motor Co, and the three companies had said their cooperation could eventually be extended to hybrid, fuel-cell and other next-generation vehicles.
Toyota has said it was open to sharing its hybrid technology with others to reduce production costs through economies of scale. Toyota spokesman Keisuke Kirimoto said the company could not comment on negotiations with other firms.
A Daimler spokeswoman also declined to comment, but added that general discussions in the industry were quite normal. A separate source said Toyota was among the companies that Daimler was in discussions with on various vehicle technologies.
Car makers around the world are looking to cut costs by spreading the load of heavy investments in new technologies such as hybrid and electric vehicles.
Toyota introduced the world's first hybrid car 13 years ago and continues to dominate the market for the fuel-sipping gasoline-electric cars with its flagship Prius model.
Toyota most recently signed an agreement to supply core hybrid parts to Mazda Motor Corp despite the latter's equity ties with Ford Motor Co, which is among the few automakers today with a proprietary hybrid system. Toyota also supplies Nissan with hybrid technology for the Altima sedan.
Daimler, for its part, launched its first hybrid car in the high-end S Class last year using mild hybrid technology developed jointly with BMW.
(Reporting by Chang-Ran Kim, Tim Kelly and Junko Fujita in Tokyo and Jan Christoph Schwartz in Hamburg; Editing by Edwina Gibbs)